I'll have Mayo with my Myriad: the effect of Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Association for Molecular Pathology v. U.S. Patent and Trademark Office on patent licensees and licensors.

• Author: Vaubel, John Forrest

1. INTRODUCTION II. BACKGROUND A. Patent-Eligible Subject Matter Under 35 U.S.C. [section] 101 B. Mayo Provides Limits in Method Patents Relating to Laws of Nature C. The Federal Circuit Adds to Section 101 Patent Eligibility Analysis in Myriad 1. Genetic Background 2. Myriad's Discussion of the Claim's Patent Eligibility Under Section 101 D. MedImmune Further Adds to Licensing Issues III. ANALYSIS A. Preemption of Laws of Nature After Mayo and Myriad B. Licensee Strategy After Mayo and Myriad C. Licensor Strategy After Mayo and Myriad IV. RECOMMENDATION A. The Tapering Effect of Myriad on Mayo and Further Limitations of Sections 102, 103, and 112 on the Impact of Section 101 Patent Ineligibility B. Appropriate Actions for Those Dealing With Patent Licenses Relating to Laws of Nature 1. Possible Courses of Action for a Licensee When the Patent Is Potentially Patent-Ineligible 2. Possible Courses of Action for a Licensor When a Patent Is Potentially Patent-Ineligible 3. Courses of Action for Licensees and Licensors if the Patent Is Patent-Eligible V. CONCLUSION I. INTRODUCTION

   The United States patent industry is both robust and valuable; recently, the Economics and Statistics Administration and the United States Patent and Trademark Office (PTO) estimated that patent-intensive industries directly accounted for 3.9 million jobs (1) and 34.8% of U.S. GDP, or $763 billion. (2) Additionally, the same report estimated that "patent-intensive industries supported an additional 3.3 million workers indirectly." (3) Given both the size and value of the patent industry, any court decision that affects this industry as a whole can have major repercussions. one concern central to this industry is how U.S. patent law affects future innovation. (4) Patent decisions from the Supreme Court and Court of Appeals for the Federal Circuit (hereinafter the Federal Circuit) commonly motivate scholars to address the theoretical underpinnings of the decisions and their effect on the law and on future innovation. But it is less common for scholars to address the practical foundations relating to those holding patent licenses unless the issue within the case directly deals with patent licenses. (5)

   Two recent cases, Mayo Collaborative Services v. Prometheus Laboratories, Inc., (hereinafter Mayo) (6) and Association for Molecular Pathology v. U.S. Patent & Trademark Office (hereinafter Myriad), (7) address the role patent law should play in the U.S. patent industry. Both of these cases provide a robust analysis of the statutory, common law, and policy theory underlying the holding in each case. (8) However, neither case provides practical guidance to licensors or licensees on what actions to take regarding their licenses in light of their holdings.

   This Note analyzes the consequences that the recent decisions in Mayo and Myriad will likely have on patent licensing, with a focus on specific actions licensors and licensees might take in response. Part II explains the statutory basis underlying the decisions in Mayo and Myriad, (9) the Supreme Court's holding and reasoning in Mayo, (10) and the Federal Circuit's holding and reasoning in Myriad. (11) Part III of this Note discusses Mayo's and Myriad's implications on the preemption of natural laws; (12) the potential effects of Mayo and Myriad on patent licensees and possible courses of action for those licensees; (13) and the likely effect of Mayo and Myriad on the patent licensors and possible courses of action for those licensors. (14) Finally, Part IV of this Note recommends actions both licensees and licensors may take to maximize their interests in light of the potential benefits and risks associated with Mayo and Myriad. (15)

2. BACKGROUND

   To understand the impact of the Supreme Court's recent decision in Mayo and the Federal Circuit's decision in Myriad on entities practicing or planning to practice patent licensing, this Note will first discuss the background and present state of patent-eligible subject matter under 35 U.S.C. [section] 101. Part A will discuss 35 U.S.C. [section] 101 and its role in patent-eligible subject matter. Part B will explain Mayo and its relation to [section] 101, and Part C will discuss Myriad and the Federal Circuit's reasoning concerning why Mayo did not alter its holding in Myriad.

   1. Patent-Eligible Subject Matter Under 35 U.S.C. [section] 101

      Title 35 U.S.C. [section] 101 (hereinafter Section 101) provides that "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." (16) While the scope of patent-eligible subject matter under Section 101 is broad, common law has limited its breadth. (17) These limits, recognized by the Supreme Court, deem "laws of nature, natural phenomena, and abstract ideas" to be patent-ineligible subject matter under Section 101. (18) This general exception to subject matter eligibility is not new--the Supreme Court has recognized it since the mid-1800s. (19) While laws of nature are not patent-eligible, "an application of a law of nature ... to a known structure or process may [qualify for] patent protection." (20) Thus, as courts often repeat, Einstein's law that E = m[c.sup.2] by itself cannot be patented; (21) on the other hand, a claim for an application of Einstein's law to a non-natural situation could be patent-eligible. (22) Yet one cannot merely take a law of nature and apply it to receive patent eligibility. (23) Instead, a claim must contain a separate "inventive concept" such that the patent does not merely represent a patent on the law of nature itself. (24) A useful--but not definitive--test for patent eligibility is the "machine-or-transformation test." (25) The machine-or-transformation test requires a patent to be "tied to a machine or to transform an article" to be patent-eligible under Section 101. (26)

   2. Mayo Provides Limits in Method Patents Relating to Laws of Nature

      In Mayo, the Court held that the Prometheus' (the patent holder's) method patent, which explained the steps in a drug treatment, was too close to a law of nature and was therefore patent-ineligible subject matter. (27) The claimed method involved a process directed at helping doctors administer thiopurine drugs to patients with autoimmune diseases by informing the doctor when the dosage was too high or too low. (28) The problem the patent attempted to solve was that, although the human body metabolizes thiopurine, thereby creating metabolites in the blood, an equivalent quantity of thiopurine in different persons results in varying effects. (29) This creates difficulties for doctors seeking to administer thiopurine without administering too much (creating dangerous side effects) or administering too little (and failing to be effective). (30)

      Before Prometheus developed the patents at issue, scientists had previously discovered general correlations between thiopurine-produced metabolites in the bloodstream and the likelihood of either dangerous side effects or the dosage being ineffective. (31) They had not, however, discovered the specific levels of metabolites that correlated to dangerous side effects or ineffectiveness. (32) Prometheus claimed rights to apply these correlations in a method patent containing three steps: (1) "administering" the drug; (2) "determining" the level of the drug in the patient; and (3) increasing the amount of drug administered if below a threshold or decreasing the amount of drug administered if above a certain level. (33) Prometheus filed for the patent on April 8, 1999, and the Patent and Trademark Office granted the patent on March 12, 2002. (34)

      After Prometheus obtained a patent on this method, Mayo Clinic Rochester and Mayo Collaborative Services (hereinafter Mayo) bought the test from Prometheus and used it for a period of time before Mayo announced it would develop and use its own test based on the method Prometheus patented. (35) Prometheus then sued Mayo for patent infringement. (36) The District Court ruled that "the patents effectively claim natural laws ...--namely the correlations between thiopurine metabolite levels and the toxicity and efficacy of thiopurine drug dosages--and so are not patentable." (37) The Federal Circuit reversed, explaining that the method involved administering a drug and determining metabolite levels, which passed the "machine or transformation test" and sufficiently "confine[d] the patent monopoly within rather definite bounds." (38)

      The Supreme Court overturned the Federal Circuit's holding when it held that Prometheus' patent was not patent-eligible subject matter. (39) It reasoned that while Prometheus' patent "takes a human action" by administering a thiopurine drug, "the relation itself exists in principle apart from any human action." (40) The Court emphasized its preference for avoiding the monopoly protection of a patent over a law of nature by simply drafting the claim to "apply it." (41) The Court found the "administering" and "determining" insufficient to transform the claim from one covering merely a law of nature. (42) The Court held that the "administering" step only covered doctors administering thiopurine drugs to autoimmune-diseased patients, a previously known process, and also that the prohibition against patenting a law of nature cannot be avoided by simply "applying it" to a technological environment. (43) The Court further reasoned that the "determining" step only had doctors engage in "well-understood, routine, conventional activity" previously used in the field, and such "[p]urely 'conventional or obvious' 'pre-solution activity'" is usually insufficient to transform a law of nature into a patentable application of the law. (44) The Court concluded that when it viewed all the steps in a patent as a whole, instead of viewing them as individual steps, there...